A Review of the Nigerian Energy Industry

Financial market products & services update

Coins, currency notes and gold bars.
Coins, currency notes and gold bars.

22 Deceber 2014, Sweetcrude, Houston – Local and international financial market products and services update.
FX: The CB’s mid-week decision to reduce bank’s NOP to 0% of the shareholder’s funds ensured a cessation of 2 way quotes trading since last week Thursday. The pair had weakened to new record level printing 187.40/50 by Wednesday after CB closed the RDAS window for the year. CBN also released a circular directing banks to utilise interbank purchased funds within 48 hours from purchase date. Impact of this has seen market become very illiquid, with only few trades done bilaterally. Emergency meeting held by FMDA resulted in not much traction as deliberation that counters to start showing indicative 2 way quotes in $100k size still failed to improve market liquidity.

FIXED INCOME: Tbills market was quite active today, with more buyers of the very short end of the Tbill curve. 1st Jan bill move 200bps lower as a result of this, as market players with short term liquidity needed an asset to put their funds. The rest of the curve was mixed and there were buyers and seller across. Bonds showed a marginal drop of 2bps across the curve which tells the story of a quiet trading session. There wasn’t a lot of action and there was some equilibrium on Jan22 as local interest met offshore client selling. ”

COMMODITIES: Saudi Arabia, the world’s largest oil exporter, is confident that crude prices will rebound with global economic growth boosting demand. Brent oil tumbled into a bear market this year as the U.S. pumped the most crude in more than three decades and economic growth slowed from China to Germany. Oil surged from a five-year low at the end of last week after Al-Naimi said the slump in prices was temporary. West Texas Intermediate climbed 4.5 percent to $56.52 a barrel on Dec. 19 and Brent advanced 3.6 percent to $61.38 a barrel. Today, Brent rose 1.4 percent and WTI gained 1.3 percent. Saudi Arabia accounted for about 13 percent of global oil output last year, BP Plc estimates.

Nigeria: Foreign investors in Nigeria are concerned that measures taken by the central bank to prevent speculation against the falling naira will hinder their ability to sell investments in the country. “The reality is that if you have $100 million dollars invested in Nigeria, in the current environment it would probably take you a year to source that foreign exchange,” Samir Gadio, head of African strategy at Standard Chartered Plc, said by phone from London. “Some people would argue that the lack of foreign-exchange liquidity these measures cause could implicitly be compared to capital controls, although they’re not formally.”

EU: After Mario Draghi has one month to win consensus on quantitative easing by showing he won’t endanger the European Central Bank. As officials prepare to consider sovereign-bond purchases on Jan. 22, the ECB president is working to get as many policy makers and as much of the public on his side as possible. One concession being debated is to require national central banks to be responsible for at least some of their own credit risk, according to people familiar with the talks.

CHINA: Two Chinese ministers offered support for Russia as President Vladimir Putin seeks to shore up support for the ruble without depleting foreign-exchange reserves. China will provide help if needed and is confident Russiacan overcome its economic difficulties, Foreign Minister Wang Yi was cited as saying in Bangkok in a Dec. 20 report by Hong Kong-based Phoenix TV. Commerce Minister Gao Hucheng said expanding a currency swap between the two nations and making increased use of yuan for bilateral trade would have the greatest impact inaiding Russia, according to the broadcaster.

Macro Economic Indicators
Inflation rate (YoY) for Oct., 2014                     7.90%
Monetary Policy Rate current                           13.00%
FX Reserve (Bn $) as at December 15 2014   35.196

Money Market Highlights
O/N                                  15.1717
30 Days                           15.9053
90 Days                           16.4141
180 Days                         17.0418

USD 1 Month                    0.1643
USD 2 Months                  0.2100
USD 3 Months                  0.2521
USD 6 Months                  0.3500                                                                                                         USD 12 Months                0.6168

Benchmark Yields
Tenor    Maturity      Yield (%)
91d          12-Mar-15       14.25
182d       14-May-15       11.77
364d       03-Dec-15       18.20
2yr          16-Aug-16        15.54
3yr          27-Apr-17        15.41
5yr          29-June-19     15.52

Indicative Currency Exchange Rates
                       Bid            Offer
USDNG         184.20       184.90
EURUSD      1.2153        1.2355
GBPUSD      1.5539        1.5741
USDJPY       119.81        119.84
USDCHF      0.97735    0.9875
GBPEUR      1.2661       1.2865
USDZAR      11.4811      11.6845
JPYNGN       N/A            N/A
CHFNGN      N/A            N/A
EURNGN      N/A            N/A
GBPNGN      N/A             N/A
ZARNGN      N/A             N/A

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